Zara Company Audit Report

Document Type:Report

Subject Area:Audit

Document 1

It was later named Zara and the first product in the store was low-priced lookalike products of popular, higher-end clothing fashions. Zara is the main brand of a fashion group Inditex (The Economist, 2011). This brand has extended quickly with real changes occurring in the 1980s where Ortega changed the plan, assembling, and dissemination procedures to decrease lead times and respond to new patterns proficiently and compellingly, which he called moment designs. To achieve these changes, different factors had to be considered including the use of information technologies and using groups of designers with different innovative skills instead of individuals. ZARA has been able to set a clear cut differentiation in the products they design and manufacture. This has enabled their presence to be highly felt by both their rivals in business and direct consumers. ZARA has been able to achieve a competitive advantage in the market by bringing the lead-time of new products down from approximately six months to just two months. This means that customers are able to obtain the very best fashion designs at high street prices within a short period of time. This has resulted to an influx in the number of customers purchasing their products. According to Bigelow (1980), the global average of visits per year per customer is 17 in Zara, as opposed to a general average of three, across other similar organizations. ZARA's vision is to be number one fashion retailer. This is primarily supported by the company's establishments and investments in a fashion where designers and researchers dedicate their time in solving different problems associated with clothing and accessories to meet customer needs.

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The essential business is fabricating and offers of garments and extras including men's apparel and ladies' attire, and also youngsters' garments (Zara Kids). These products are supplied based on consumer trends to ensure they do not face problems with their inventory (Greg, 2012). Analysis of both external and internal environments of ZARA will enable identification of opportunities strengths and weaknesses of the company which can be managed to sustaining a competitive advantage. Analyzing the current strategies affecting the company will enable to find viable recommendations which will help improve the company in its long-term plans. External analysis General Environment The general environment of an organization is made up of various key areas which can have a significant impact on the firm, its ability to attain and or maintain a competitive advantage in the market.

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Political/ legal Trade barriers which may exist in certain regions like East Asia, Instability in governments can hinder investing in some countries Implications of taxes and breaks Government stability and support in major markets like the United States Economic High cost of living in Australia Recovery from global financial position slowing economies, debts and bank issues Technology Advances in technology encourage global shopping. More consumer power Social media has increased marketing opportunities Reduced wastage of raw materials through recycling and creation of new materials Sociocultural Growing population, retail culture, popular culture fueled by fashion and celebrities, fashion trends and growing awareness of keeping fit Environmental Focus on suppliers not just retailers, growth of population and international business and focus on corporate social responsibility (Grundy, 1993) (Moran and Reisenberger, 1994) (Reserve Bank Australia, 2014) Opportunities and threats According to Curley (2014), social media has rapidly grown over the past few years and thus determining the mainstream opinion.

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This has furnished firms with the chance to advertise their items and administrations. Therefore ZARA has to ensure it stays and moves with the changing market trends. This will enable them to stay at the top of the market. Industry Environment Analyzing industry environment enables one to understand the potential for profitability and sustainable competitive advantage of the firm. Power of buyers Saturated market Low competitive differentiation Medium Power of suppliers Large supply industry Low Threat of substitutes Many competitors, changing trends and counterfeit clothing High Threat of new competitors and business rivals Saturated market with competitors, many direct competitors and multi market competition High Intensity of rivalry Many direct competitors i. e, H & M, GAP, NeXT and Uniqlo High Opportunities and threats ZARA can increase its sales due to an increasing population.

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This negatively affects the overall profits and sales of the company leading to operating in losses. This can be stopped through the manufacture of hard to imitate products. As a result of the available opportunities and threats, the market proves to be favorable for ZARA and other direct competitors because there is room for expansion in terms of sales and market share. However, some threats need to be overcome to achieve this. This can be done through use of various strategies including cooperative unions, to boost value and as a source of increased competitive advantage. billion Return on equity 11. Reputation Long serving firm Marketing, branding and sponsorship Organizational 2100 stores in 88 countries Research and development Research into materials and new designs Production of raw materials from used materials (recycling). Physical Buildings and land Lease agreements with fashion stores globally Several assets including furniture, computers, design machines and The stock to be sold Human resources organization culture Management Strategic vertical and horizontal acquisition Technological Trademarks and patents International licensing (ZARA, 2011) Capabilities As a global company, ZARA has different capabilities which enable it to be ranked among the best retailers.

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Some of the capabilities include; Sourcing Materials Inbound coordination’s Flexible assembling/Outsourcing outbound coordination’s in-store deals, statistical surveying Product outline, obtainment Outsourcing Distribution, incorporated arranging corporate vision and mission Brand Image. Capability Rare? Costly to imitate? Non substitutable Valuable? Competitive advantage Innovation Y Y Y Y Sustainable Licensing & sponsorship N Y N Y Temporarily sustainable Brand image Y Y Y Y Sustainable Market research and development Y Y N Y Sustainable Financial capital N Y N Y Temporarily sustainable Value chain analysis Activity Value creation Competitor comparison Operations strategy Growth plan for 2017 Maintaining growth in Spain and Greece by organizing head offices all over the world Superior Marketing and sales strategy Global marketing and branding which are aggressive Provisions of in store environment Expand sales in Europe and east Asia Equivalent Innovation strategy Continue research and innovation by use of IT technology Superior HR.

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References Bigelow, J. Strategies of Evolutionary and Revolutionary Organizational Change, Academy of Management Proceedings. Battor, M. Zairi, M. Francis, A. March 10, 2011. Retrieved November 5, 2015. Greg Petro, Approach. The Future of Fashion Retailing: The Zara Approach. Accessed April 5, 2016. and Riesenberger, J. R. The Global Challenge: Building the New World-wide Enterprise, McGraw-Hill, London. Reserve Bank Australia, 2014. Reserve Bank of Australia online. Website:http://www. zaratextiles. com/vision. php.

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